On January 1, the partners of Van, Bakel, and Cox (who share profits and losses in the ratio of 5:3:2, respectively) decide to terminate operations and liquidate their partnership. The trial balance at this date follows: Debit Credit Cash $ 24,000 Accounts receivable 78,000 Inventory 64,000 Machinery and equipment, net 201,000 Van, loan 42,000 Accounts payable $ 77,000 Bakel, loan 32,000 Van, capital 124,000 Bakel, capital 96,000 Cox, capital 80,000 Totals $ 409,000 $ 409,000 The partners plan a program of piecemeal conversion of the partnership’s assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, is to be distributed to the partners at the end of each month. A summary of the liquidation transactions follows: January Collected $57,000 of the accounts receivable; the balance is deemed uncollectible. Received $44,000 for the entire inventory. Paid $8,000 in liquidation expenses. Paid $68,000 to the outside creditors after offsetting a $9,000 credit memorandum received by the partnership on January 11. Retained $16,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. February Paid $9,000 in liquidation expenses. Retained $4,000 cash in the business at the end of the month to cover additional liquidation expenses. March Received $152,000 on the sale of all machinery and equipment. Paid $11,000 in final liquidation expenses. Retained no cash in the business. Prepare proposed schedules of liquidation on January 31, February 28, and March 31 to determine the safe payments made to the partners at the end of each of these three months.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, the partners of Van, Bakel, and Cox (who share profits and losses in the ratio of 5:3:2, respectively) decide to terminate operations and liquidate their partnership. The trial balance at this date follows:

	Debit	Credit
Cash	$	24,000
Accounts receivable		78,000
Inventory		64,000
Machinery and equipment, net		201,000
Van, loan		42,000
Accounts payable			$	77,000
Bakel, loan				32,000
Van, capital				124,000
Bakel, capital				96,000
Cox, capital				80,000
Totals	$	409,000	$	409,000

The partners plan a program of piecemeal conversion of the partnership’s assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, is to be distributed to the partners at the end of each month. A summary of the liquidation transactions follows:

January	Collected $57,000 of the accounts receivable; the balance is deemed uncollectible.
	Received $44,000 for the entire inventory.
	Paid $8,000 in liquidation expenses.
	Paid $68,000 to the outside creditors after offsetting a $9,000 credit memorandum received by the partnership on January 11.
	Retained $16,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners.

February	Paid $9,000 in liquidation expenses.
	Retained $4,000 cash in the business at the end of the month to cover additional liquidation expenses.

March	Received $152,000 on the sale of all machinery and equipment.
	Paid $11,000 in final liquidation expenses.
	Retained no cash in the business.

Prepare proposed schedules of liquidation on January 31, February 28, and March 31 to determine the safe payments made to the partners at the end of each of these three months.

VAN, BAKEL, AND COX PARTNERSHIP
Proposed Schedule of Liquidation
February 28
Van,
Capital
and Loan
50%
Bakel,
Capital
and Loan
30%
Сох,
Capital
20%
Noncash
Cash
Liabilities
Assets
Balances before January 31 safe
payments
Safe payments to partners - January 31
254,000 X
72,800 X
Balances - February 1
254,000
72,800
Paid liquidation expenses
Subtotal (actual balances)
254,000
72,800
Maximum loss on assets
Maximum liquidation expenses
Subtotal (potential balances)
254,000
72,800
Allocation of deficit capital balance
Safe payments to partners - February 28
$
254,000
$
72,800

VAN, BAKEL, AND COX PARTNERSHIP
Proposed Schedule of Liquidation
January 31
Van,
Capital
and
Bakel,
Capital
and
Сох,
Сapital
20%
Noncash
Assets
Cash
Liabilities
Loan
30%
Loan
50%
Balances - January 1
$ 24,000
77,000
124,000
96,000 X
80,000
Collected accounts receivable
30,000 x
124,000 X
96,000 X
80,000
Sold inventory
Paid liquidation expenses
Paid accounts payable
Subtotal (actual balances)
54,000
77,000
248,000
192,000
160,000
Maximum loss on assets
Maximum liquidation expenses
Subtotal (potential balances)
54,000
S 77,000
248,000
192,000
160,000
Allocation of deficit capital balance
Safe payments to partners - January 31
$ 54,000
$ 77,000
$ 248,000
$ 192,000
$ 160,000

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